Stock Options Expensing Still Not Devastating Tech Companies

from the wait-'til-next-quarter dept

The media, with its fascination over stock options expensing, is playing up the fact that Yahoo's first-quarter earnings took a major hit on options costs, to the tune of $65 million. Of course there were no fundamental changes to Yahoo's profitability as the new regulations are purely an accounting matter. The company's operations haven't changed at all. Furthermore, Wall St. clearly recognizes the earnings drop for what it is, and isn't punishing the company. That being said, the new regulations aren't entirely harmless. Accounting, for a public company, isn't just a matter of adding and subtracting. Ideally, the company uses their quarterly reports to paint a picture of the company's health to investors, hence the use of Pro Forma accounting, as opposed to strictly GAAP. Mandating that companies expense options in a certain way minimizes their ability to communicate with investors in a manner in which they see fit. Still, the regulations are in place, and despite all of the dire warnings about how the new rules would stifle innovation and devastate tech companies, it looks like things will be ok.

Second

Joe, I think you hit the nail on the head - Wall St. clearly recognizes why the earnings dropped. And regular-Joe's (no pun intended, really) that will be investing should take the time to understand what it's all about - if they don't, then they're just bad investors. Earnings should be one of the things you look at, but you really need to kick the tires, so to speak, before investing - and that means looking at the whole company and not just the earnings.